June 2009 | Volume 28 / Number 1
CRM, BPO & Teleservices
Locating For Growth
By Brendan Read,
• IVR, speech recognition, outbound voice, SMS, and e-mail notifications, and web self-service can deflect customer contacts or handle them at the fraction of the cost of live agents. Turning branches and stores into informal contact centers and subject matter experts into agents with the aid of IP routing and presence/unified communications limit hiring and housing separate staff.
“Larger call centers are having a difficult time justifying large staff forces,” explains Michael DeSalles, Strategic Analyst, Contact Centers Unit with Frost & Sullivan. “Self service continues to be a popular option for contact centers as it significantly decreases costs. Outbound notifications, alerts and value messaging have the added benefits of maximizing customer satisfaction for simple transactions that do not require agent intervention.”
• Hoteling: providing workstations as needed on a shared basis rather than dedicating them to employees whether they are working on a particular day or shift or not, reduces space requirements and expenses
• Outsourcing remains a viable choice especially for peak, seasonal, and short-term contact handling to avoid paying for capacity when it isn’t needed
• Home agents have proven to avoid or minimize facilities costs and cut turnover while widening labor pools and improving flexibility, quality, and productivity and enabling business continuity
Key to these decisions is staff quality to attract and retain customers, who want to communicate with agents who are smart, well-trained, who can relate and respond superbly to their needs via multiple channels, and in their languages both culturally and literally. That means taking a hard look at onshoring, nearshoring, and offshoring, and home agents weighing up costs and benefits.
“One of the revelations that this downturn has had on our clients, is the realization that any successful long-term operating strategy must be based on flexibility,” says Mark Seeley, Senior Managing Director, CB Richard Ellis, Labor Analysis Group. ”Reacting to the current downturn by frantically shedding space, only to frantically reabsorb it on the upswing is highly costly and inefficient. Instead, we are advising our clients to build greater flexibility in to their portfolios by pursuing alternative solutions such as hoteling, outsourcing, and work at home.”
If the past boom was heralded by big moves offshore, especially to India and The Philippines to tap into high quality workforces at a fraction--¼ to ½--the costs of having contacts handled domestically, the next one may require that this strategy be deployed carefully and sparingly. While the value proposition is still and will continue to be there, its popularity, has led to reports of labor market saturation, high turnover, and rising costs in the larger cities.
This trend is being accelerated by the growth in India especially of business process outsourcing (BPO) work such as accounting and finance, and IT employment. The same labor cost/quality arbitrage that had attracted contact centers are bringing in higher-foodchain firms like IBM, which reportedly bring thousands of IT jobs to India: while laying off some 5,000 American employees.
BPO and IT firms are drawing the best from contact centers thanks to higher wages, more interesting work, career paths, greater prestige, and more sociable hours: the work is carried out during the day whereas contact centers are busiest at night to match U.S. and U.K. volumes.
There is also well-publicized increased consumer and business customer concerns about the quality of service from offshore. Misunderstandings arising for a lack of cultural affinity and English language use differences between agents and customers have led to reports of longer and repeated calls that increase costs and decrease satisfaction.
These factors, combined with the wage and turnover issues and with high U.S. unemployment are prompting especially the higher level contacts to stay in-country or in some cases return from offshore. There have been several high-profile movebacks including AT&T, Sallie Mae, and United Airlines. One outsourcer had told CBRE’s Seeley that they are seeing a lot of growth from companies that don’t the work to go offshore anywhere, to find domestic markets.
“The economy is definitely causing people to rethink where they operate, and many of them are re-focusing on U.S. markets, after several years of offshoring,” says Seeley. “There are several driving factors to this. One is political. To announce that you’re going to lay off more people in the U.S. and create new jobs in India, while US unemployment rates are nearing their highest levels since the Great Depression, is not a popular thing to do right now. Another is economic. Since unemployment rates are so high domestically, new markets that were previously too tight from an employment perspective are opening up.
“Of course, there are always exceptions to the rule, such as IBM’s announcement. But by and large, we are seeing our clients more interested in U.S. markets than they have been in years.”
Peter Ryan, contact center and outsourcing analyst at Datamonitor is deeply skeptical about claims that offshore agents are less effective than those onshore. If they are well trained, monitored, and coached they will perform well: like agents anywhere.
“There is an unfortunate negative stereotype of especially the Indian outsourced offshore agent that has emerged from the media coverage that like most stereotypes run counter to the facts,” says Ryan. “The well-publicized examples notwithstanding, the information indicates that offshore agents are as service-oriented and productive as their onshore counterparts.”
U.S. President Barack Obama plans to discourage offshoring by closing tax loopholes for American firms investing offshore that he says gives those using them an unfair advantage over others putting their money into domestic operations. Critics say the actions may increase offshoring to India and The Philippines via outsourcers because the labor cost benefits far outweigh the added taxes; the measures do not apply to outsourcing. It could also drive U.S.-based outsourcers to tax-friendlier nations so they can compete with foreign-based firms who do not have that tax burden and who can offer lower prices.
Offshoring will continue to be a viable option to serve other markets, such as the U.K. U.S.-based teleservices firm eTelecare recently acquired The Phone House, which has a contact center in South Africa, and a contract with to the former owner, U.K. telecom provider Talk Talk Group.
“South Africa’s highly educated English-speaking labor pool, modern infrastructure and cultural affinity for the U.K., along with its lower cost relative to U.K. onshore delivery, make the country an ideal location from which to serve the U.K. market and a strategic addition to the our delivery footprint,” says eTelecare president and CEO John Harris. “We fully intend to continue to invest to build our business in the United Kingdom and expand our presence in South Africa.”
The Latin American Nearshore Option
Latin America has emerged as complement and as an alternative to India and The Philippines. Nations such as Argentina, Colombia, El Salvador, Guatemala, Honduras, Mexico, and Panama enable affordable outreach to the growing U.S. Hispanic market while providing a lower-cost English speaking option.
Susan Arledge, president, Arledge Partners Real Estate points out there is a strong demand for fluently (reading/writing) bilingual Spanish-English agents that Latin American nations can provide. This request is aided by growing familiarity with and acceptance of Spanish accents in the U.S. that have avoided the issue of cultural affinity that has impacted English-only services from India.
“While many areas in the U.S. have large Hispanic populations, but not all are able to provide truly bilingual agents,” explains Arledge. “This has driven many companies to seek nearshore solutions in Latin America where English as a second language is taught from elementary school forward.”
Telus International is opening and expanding bilingual contact centers in Guatemala, El Salvador, and Panama, and in Las Vegas, Nev. When asked why it is having both Latin American and American bilingual centers spokesperson Shawn Hall said it needed geographic diversity in case of man-made or natural disasters and the ability to provide additional English-language support.
There are also excellent contact center training programs available in Latin America to enable agents and managers deliver services to U.S. standards. The Resource Center for Contact Center Professionals offers training and certification courses in the Dominican Republic, Guatemala, and Panama as well in the U.S. commonwealth of Puerto Rico.
Latin American nations are also excellent locations for higher-foodchain BPO. For example Genpact’s Guatemala City contact center, which opened in 2008, now handles finance and accounting processes such as accounts payable and accounts receivable (AP/AR).
Guatelema has an abundance of graduates with accounting and finance degrees, explains Steve Rudderham, Genpact Business Leader for Latin America Operations. The AP/AR transaction capability is helping the Genpact’s site gain an edge over other contact centers in recruiting and retaining top talented staff. It establishes socially desirable 9am to 5pm hours, offers competitive wages and benefits, and requires a high level of computer skills.
“There’s a lot of contact centers in Guatemala but what we’ve been able to do is leverage many of the processes that we do globally now in that country, “explains Rudderham. “As a result our staff are beginning to see a career path right from the contact center level through to AP/AR to management rather than just being in the contact center, which in turn has helped us attract top talent.”
Going into Latin America will require some savvy. The fully loaded wage rate must be considered, explains Arledge, not just the monthly wages but also mandated benefits including vacations, Christmas bonuses, termination compensation, holidays, social security, and accrued allowances. These can increase wages by as much as 45 percent in Nicaragua and as low as 22 percent in Honduras; El Salvador and Guatemala fall in between at 27 percent and 37 percent respectively.
Also, large (1,000+ size) centers will often not be as successful in attracting college educated, truly bilingual labor forces. That is because most countries in the region will not support a center of that size. One key factor is that it is difficult to accurately ascertain the number of potential employees who are fluent in both languages.
“Data on bilingual workers is incomplete in these countries and statistics are not maintained in either the U.S. or Latin America, on bilingual populations,” says Arledge. “To find out you need to get on the ground to research and know the labor markets.”
The economic downturn has opened up locations once thought to be off-limits costwise to contact centers such as Las Vegas, Michigan, and upstate New York, such as Buffalo, Rochester, and Syracuse. Financial and retail closures have led to larger labor pools. Manufacturing especially auto industry changes have weakened union environments. The entertainment industry has also suffered, evidenced by dropping casino visits.
Other locations are moving up the ladder. South Carolina, which has long good location for general customer service is now viable for higher-end customer technical support and internal help desks.
Be careful: high unemployment alone does not mean automatic viability. Site selectors points out, for example that Northern California has a high jobless rate but also high taxes that make locating and doing business there prohibitive. While larger metros that have experienced bank and store closures, and may have many vacated contact centers and laid off experienced staff, are also the first labor markets to bounce back, leading to high employment costs.
The locations that rank well this go-round are also the same ones that score well the last time in terms of availability, cost, quality, and saturation, namely the smaller (under 250,000) tertiary or Tier 3 metros. Only this time there may be more competition. While these cities have drawn in most cases teleservices companies in the past there is now more interest from in-house contact centers in these communities as they realize the benefits of situating there. These firms tend to pay marginally more and offer higher employee-attracting prestige than outsourcers.
“Our research shows that nearly 70 percent of all outsourcers that opened operations in 2008 did so in Tier 3 markets,” reports Seeley. “While overall only 17 percent of all in-house call centers are located in tier 3 markets, 33 percent of them opened in tier 3 markets in 2008. So the trend is growing among in-house centers as they become more aware of the benefits associated with these less costly and less competitive markets.”
Going Home (Literally)
The best and quickly becoming the most popular contact center location options may literally be at home. Repeated studies show that home agent programs are a key staff attractant; they also boost quality and productivity and reduces turnover while increasing flexibility. The Telework Coalition estimates net benefits of $10,000 to $20,000 per agent per year.
Utilizing home-based agents lowers labor market barriers, thereby providing much wider access to prospective employees. With them contact centers can more effectively utilize tertiary markets by keeping their centers small which avoids saturating the available workforce and property markets. Agents can exclusively work from home or more commonly, travel in periodically for meetings and training in a hub-and-spoke array; agents live/work typically no more than 2 hours away.
Thomas L. Cardella Associates is a well-respected teleservices firm with contact centers located in several Iowa communities. It requires its home agents to be within reasonable driving distance of one of its sites.
“Clients are concerned about the quality: the ability of home agents to get and convey their brand identity, along with background noise, and training,” explains Thomas Cardella, the firm’s President and CEO. “We carefully screen candidate employees for suitable facilities and environments. We also require our home staff to come in periodically for training, to meet with colleagues and supervisors, and to develop and maintain acculturation with our clients and our firm.”
CBRE’s Seeley is seeing home agent programs slowly supplement and gradually replace traditional contact centers. One driver: companies do not want to be in a position where they are shedding a lot of space and later lease it back again at much higher costs.
“With home agents once the market comes back companies don’t need to scramble for locations and build new facilities,” explains Seeley.
Yet just as with traditional site selection, going to home agents especially in the hub-and-spoke pattern also requires careful labor market analysis. CB Richard Ellis has begun offering this for its clients at their request, applying its proven methodology. It has developed a home agent profile based on extensive research. It found that potential employees interested in work at home programs fit less into a consistent demographic profile as they do a behavioral or lifestyle profile.
“By interviewing and surveying companies that have implemented successful, and unsuccessful home agent initiatives, we have been able to identify this profile and model it to source markets with a greater number of people with a propensity towards this type of work,” says Seeley.
The following companies participated in the preparation of this article:
Arledge Partners Real Estate
Buffalo Niagara Enterprise
CB Richard Ellis
Information Technology Industry Development Agency (Egypt)
PROESA (El Salvador)
Invest in Guatemala
Invest in Honduras
Iowa Department of Economic Development
Office of Business Development (Las Vegas)
Michigan Economic Development Corporation
Puerto Rico Economic Development Company
The Resource Center for Contact Center Professionals
Rochester Economic Development Corporation
South Carolina Jobs-Economic Development Authority
Syracuse Economic Development